Curitiba Accelerates Focus on IT, Drawing New Investors and International Software Firms

Despite Curitiba being one of the first cities to develop a technology hub in Brazil, investors have long tended to favor other technology centers in cities such as Recife, Florianopolis and Campinas. But now the capital of the state of Parana in southern Brazil is now very much on the radar of venture capital investors, with the establishment of Supernova, Curitiba’s first start-up accelerator, late last year just one of several promising new developments.

Three companies (Get-Out, Mypileof, Znapbox) were selected for the first round of integration into the Supernova portfolio, while five more companies will be selected in the second round, said Cristiano D’Avila, co-founder of the accelerator, which provides local start-ups with mentoring and office-spaces.

Another major local development is the formation of the first network of angel investors from Parana State, supported by the Federation of Industries of Parana (Fiep), through the International Innovation Center (C2i). The group, launched in October 2012, is comprised of 23 individual investors. This initiative aims to promote investment in companies located in Parana, which need financial investments in order to stimulate growth in both domestic and overseas markets.

“We are looking for innovative businesses with the potential to gain scale,” said Felipe Couto, coordinator of technological services and innovation at Senai International Innovation Center.

Twice-monthly investment forums are being held  to present companies to potential investors, with the aim of attracting investment of 200,000 to 500,000 reais in each company and potentially as much as 3 million reais ($1.3 million) in total. Factor in other venture capital funds dedicated to companies from Brazil’s southern region and total investment in companies located in Parana could soon reach 60 million reais ($26.09 billion).

An International Success Story

IT companies in Curitiba are becoming increasingly focused on international operations. One such example is Euro IT, a 12-year-old firm that offers car rental management software and boasts 600 clients in Brazil and an annual turnover of 2.5 million reais. Euro IT commenced international operations this year and now offers car rental management software to three Nissan car dealerships in Florida. The opportunity to operate in the US market emerged through Euro IT’s partnership with Frontline Performance Group – an international consultancy firm.

“They were interested in having  software management to offer to their car rental clients in the United States”, said Euro IT President Julian Gritsch.  Besides the US, Euro IT has also initiated operations in Argentina, but the car rental market in Latin American is much smaller than in the US — as Gritsch noted, “The US market is three time the size of the Brazilian market.”

Euro IT integrates a group called Curitiba Offshore, founded in 2009 with the objective of boosting software and solutions exports, and supported by the Association for the Promotion of Brazilian Software Excellence (Softex). Curitiba Offshore is home to 17 small/mid-size software companies from Parana with an annual turnover of up to 25 million Brazilian reais ($10,870 million).

Aside from Euro IT, two other local companies have also started international operations: Cinq, a specialist in software development projects and IT services for the corporate market, with a partner in Atlanta, Georgia; and DB1 Informática, a firm based in Maringa city, Parana, with another office in India, which provides outsourcing services to global clients. International operations now account for 40% of Cinq’s annual revenues.

The reason for the scarcity of firms with international operations is that, with the Brazilian economy booming, many companies chose to focus on the domestic market and reduced their interest in exportation. “The most important thing is not the number of companies that join this project, but the achievement of effective results,” said Izoulet L. M. Cortes Filho, executive coordinator from Curitiba Offshore.

Cortes admits that language can prove a barrier, mainly for the provision of outsourcing services to international clients, as “There are insufficient training programs focused on the international market.”

International operations are primarily focused on providing outsourcing services. With its high quality of life, excellent urban infrastructure and a high-quality workforce at a low cost, Curitiba has attracted many multinationals becoming one of world’s leading IT and software companies. Clients of Curitiba Offshore include ExxonMobil, HSBC, Nokia, Microsoft, Siemens, Accenture and Wipro, while IBM, Dell and HP were among the first international tech companies to set up operations in Curitiba.

“We have received great demand  from multinationals interested in setting up their businesses in Curitiba, especially from Spain, China and Japan,” said Armando Moreira Filho, technical head at Curitiba Development Agency.

Curitiba’s Software Clusters

There are six software clusters in the state of Parana. In Curitiba alone, there are 5,300 companies in the IT sector, with this market employing 35,000 workers. Local government has offered some incentives to technology companies to set up businesses in Curitiba, which include a reduced sales tax of just 2%, and the companies located in the Tecnopaque (Technopark) and Parque de Software (Software Park) areas have a ten-year exemption from real estate and other municipal taxes.

The main challenge for the IT market in Curitiba is to provide growth for local IT companies through increased investments for this sector, allowing the companies to gain scale, said Sérgio Mainette, CEO from Software Park Association, the oldest technology cluster in Curitiba which is home to 20 companies.

Today, the main funding for IT companies is provided by Banco Nacional de Desenvolvimento Econômico e Social (BNDES), Brazil’s development bank, and Brazilian Innovation Agency (FINEP), a government agency.

With the growth of the IT market in the region the demand for professionals in this area is outstripping supply. At present there are 80 positions available at Parque de Software. The number of the jobs in the IT sector has risen by 25%, while the average salary has increased by 32%.  Yet, at 2,598 reais ($1,130 thousand), the average salary in the IT sector in Curitiba remains lower than in other Brazilian cities such as Brasilia, Porto Alegre and Sao Paulo.

In total, the Brazilian IT market grew 10.8% in 2012, reaching $123 billion in revenue last year, according to IDC.